Last month, the Securities and Exchange Commission (SEC) issued a press release describing its proposed changes to the Investment Advisers Act of 1940. The Act contains various advertising and cash solicitation rules for investment advisers when soliciting clients and investors, which the SEC is proposing to modernize.
According to the SEC, the proposed changes are “intended to update these rules to reflect changes in technology, the expectations of investors seeking advisory services, and the evolution of industry practices.” On the advertising rule side, the proposed rules broaden the definition of advertising, add principles-based prohibitions on advertising practices, allow testimonials, endorsements, and third-party ratings, prohibit certain types of performance-related advertising, and require internal advertising review and approval. On the solicitation rule side, the proposed rules broaden the scope of solicitation (e.g. by expanding the forms of compensation for solicitation arrangements covered under the Act), require an adviser compensating a solicitor to enter into a written agreement, and modify the solicitor disclosure requirement to include additional information.
The proposed amendments are still under a 60-day period for public comment and investor feedback.